GBP/USD: Technical outlook and review...

Weekly view – The GBP/USD had another absolutely spectacular week, gaining a little over 320 pips into the close 1.5870. This advance, however, forced price into the jaws of a very significant weekly swap level coming in at 1.5912. Therefore, we may see this market correct itself this week.

Daily view: From this viewpoint, we can see that the upward momentum begun to diminish later on in the week, as price shook hands with a clear daily supply area at 1.5943-1.5840 (encapsulates the aforementioned weekly swap level). Nonetheless, just below this zone sits potential support in the form of a daily swap zone at 1.5813-1.5773. If we can get below here this week, the market may reverse direction. It will be interesting to see what the 4hr timeframe has to say…

4hr view: Following Thursday’s rebound from the 4hr supply area at 1.5943-1.5910 (located deep within the daily supply area mentioned above at 1.5943-1.5840); Friday’s sessions saw the GBP extend lower driving price deeper into the near-term 4hr swap area at 1.5833-1.5855, which as you can see held this market higher going into the close.
Going forward, there were clearly no big changes over the weekend as the market opened a mere three pips lower than Friday’s close at 1.5867.

Technically, both the weekly and daily timeframes are showing price positioned around resistive structures (see above), so we’re naturally favoring shorts over longs at the moment. But as things stand, there is still potential buy-side liquidity lurking just below on this timeframe – the aforementioned 4hr swap area and the round number 1.5800. Until these barriers have been taken out, it would be very difficult to justify selling this market no matter what the higher timeframes are telling us. With that being said though, we still have our eye on the 4hr supply area at 1.5943-1.5910 for a possible short trade. However, we would need to see very, very attractive lower timeframe confirming price action to convince us to commit capital here.